Oil advanced with investors awaiting a key meeting between OPEC+ producers on output policy while a stalemate in Iranian nuclear talks drags on.
Futures rose 0.7 percent in New York on Wednesday. The OPEC+ alliance will meet on Thursday to discuss output plans with Russia weighing a proposal to boost supply and Saudi Arabia signalling it prefers a more gradual approach.
Meanwhile, negotiations over Iran’s nuclear program are facing the prospect of renewed delays, quelling the likelihood of a quick return of the nation’s supplies.
“No sanction relief is going to really suggest we could have less output from Iran and that’s going to keep this market tight,” said Edward Moya, senior market analyst at Oanda Corp.
In other signs of tightening supply, Total, among Europe’s biggest oil refiners, bid for benchmark Forties crude at the highest premiums in 17 months.
Oil posted the best first half since 2009 with key economies such as US, the UK and China recovering from the pandemic. OPEC+ sees the market in deficit for the rest of this year if it keeps production steady, but the spread of the delta variant could threaten the global demand recovery taking shape.
US shale producers are remaining disciplined with their spending and won’t overwhelm OPEC as the cartel contemplates bringing spare supplies back to the market, ConocoPhillips chief executive officer Ryan Lance said in a presentation to analysts on Wednesday.
OPEC+ had previously been due to convene its advisory body – the Joint Ministerial Monitoring Committee – on Wednesday. Possible supply hikes are being discussed for August or September, Kazakhstan’s Energy Minister Nurlan Nogaev told reporters on Wednesday.
Prices:
- West Texas Intermediate for August delivery climbed 49 cents to settle at $73.47 a barrel in New York
- Brent for August settlement, which expires on Wednesday, advanced 37 cents to end the session at $75.13 a barrel
- The more active September contract rose 34 cents to close at $74.62 a barrel
Meanwhile, Royal Dutch Shell Plc also bid for benchmark Forties crude aggressively. There were no offers. The gap between physical North Sea prices and futures contracts jumped.
In the US, crude inventories tumbled last week to the lowest since March 2020, according to an Energy Information Administration report on Wednesday. Stockpiles at the nation’s biggest storage hub at Cushing, Oklahoma, declined, while gasoline supplies rose.
“If demand keeps going the way it’s going, we’re definitely going to see tight supplies for both oil and products in the fourth quarter,” said Phil Flynn, senior market analyst at Price Futures Group.
Along the oil futures curve, timespreads are showing signs of supply tightness. West Texas Intermediate crude for September delivery closed at a more-than $1-a-barrel premium to the October contract on Wednesday, the first time settling above that level in more than a week.
Envoys negotiating over Iran’s nuclear programme won’t reconvene as planned this week in Vienna and aren’t sure when a seventh round of diplomacy will be scheduled, according to four officials who asked not to be identified discussing the talks. European and US diplomats originally sought to restore the accord before this month’s Iranian presidential election.
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